WASHINGTON—Mark Hayes was a Washington policy wonk on a long and steady ascent: a senior Senate health-care aide, a role writing President Barack Obama's health-care overhaul and a spin through the revolving door to a lobby firm where he banked 20 years of contacts.

A series of emails to a client was all it took to put that carefully crafted career on hold.

ENLARGE

Mark Hayes speaks to Sen. Charles Grassley, to right of Max Baucus, in 2009. Mr. Hayes worked for the Iowan before becoming a lobbyist.
Roll Call/Getty Images

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On April 1, Mr. Hayes sent messages to an investment-research firm predicting a change in Medicare policy. The tip, forwarded to Wall Street, sparked a surge in health-insurance stocks and landed Mr. Hayes at the center of a federal investigation of Washington's political-intelligence business.

The lobbyist, 46 years old, has since been fired by one of his clients and is on leave from his employer, Greenberg Traurig LLP, according to people close to the firm. The Securities and Exchange Commission is probing whether his actions violated insider-trading rules. Mr. Hayes didn't respond to requests for comment. His lawyer and the SEC declined to comment.

The episode is sending tremors through Washington's world of policy experts, lobbyists and Wall Street researchers. The investigation has signaled that federal prosecutors are trying to clamp down on what they see as the capital's loose oversight of market-moving information.

More broadly, it has shaken a city where acquiring and sharing information is a basic tool of business. Some insiders say the traditional ways of operating may need to change.

Earlier

It "is astounding that so many in Washington view the trading of unreleased government information as simply 'business as usual,'" said William Pewen, a former Republican health-care aide who also was on the Senate Finance Committee.

Among those leading the investigation into Mr. Hayes's activities is his former boss and friend, Sen. Charles Grassley (R., Iowa). Mr. Hayes worked as Mr. Grassley's top health-care aide for over six years and the lawmaker once considered him a protégé.

Mr. Hayes, who hasn't been charged, has been interviewed twice by Mr. Grassley's staff.

"I valued Mark Hayes greatly on my committee staff, and I know him to be a good person," Mr. Grassley said in a statement to The Wall Street Journal.

At issue for Mr. Hayes is whether his tip came from government officials, which legal experts say could violate insider-trading rules, or whether the email reflected his own analysis, which is legal.

Mr. Hayes told Mr. Grassley's investigators his prediction came from his own analysis, not a specific tip, Mr. Grassley's spokeswoman said. Mr. Hayes said one of the facts he used to make his call came from Mr. Grassley's current health-care aide, Rodney Whitlock, the spokeswoman said. Mr. Whitlock worked for Mr. Hayes for several years when the latter was a Grassley staffer.

During a meeting in March and in subsequent emails, Mr. Whitlock passed important information to Mr. Hayes, including that the Senate was planning a confirmation hearing for the interim head of the Centers for Medicare & Medicaid Services, the spokeswoman said.

"Rodney and Mark have talked regularly, as might be expected, given their positions," the spokeswoman said. "Rodney had no advance notice or knowledge" of the decision and didn't know Mr. Hayes worked for a political-intelligence firm, she said.

Friends of Mr. Hayes say he got in trouble partly because he did what he had been trained to do: build a network of contacts to ferret out policy information.

Mr. Hayes, born in Missouri, earned a pharmacy degree before getting a job with home-state senator, Kit Bond, a Republican. By the mid-1990s, he was drafting the Republican answer to the Clinton health-care plan. In 2003, as a staff member of the Senate Finance Committee, he helped draft the Medicare prescription-drug benefit bill.

He and his Democratic counterpart, Jonathan Blum, were known to former senate aides as the bill's "godfathers." Mr. Blum is now a senior official at the CMS, the agency that oversees Medicare. A spokesman for CMS declined to comment.

On the Finance Committee, Mr. Hayes played a significant role crafting Mr. Obama's health-care law. The Capitol Hill newspaper Roll Call said a former aide dubbed him "The 101st senator" due to his influence.

The Finance Committee has become a training ground for health-care lobbyists. More than 100 former committee aides have worked as lobbyists, more than any other committee, according to the nonpartisan Center for Responsive Politics.

Many of them gather once a year at the health-care "prom," a Health Policy Ball at a Ritz Carlton. Mr. Hayes has attended in the past, said a friend. Among other attendees is Katherine Hayes, his wife, a former a health-care lobbyist herself and now director of health policy at the Bipartisan Policy Center, a nonprofit policy organization.

"To survive the hard times in this town, you have to be smart, respected and liked. Mark has all three attributes in spades and will be fine," said Chris Jennings, a longtime Democratic health-care consultant. Mr. Jennings once employed Mr. Hayes's wife as a lobbyist. He now advises the Bipartisan Policy Center, where she works.

In 2010, Mr. Hayes became a lobbyist. At Greenberg Traurig, he represented Humana Inc., among other health-care interests. Two years later, Mr. Hayes helped Greenberg Traurig land a contract with Height Securities, one of a rising number of firms that gathers information in Washington about policy on behalf of Wall Street traders.

On April 1, Mr. Hayes's services were required. At 3:09 p.m., Height policy analyst Justin Simon emailed asking about rumors the government would reverse course on previously announced cuts in funding for health insurers. A few minutes later, Mr. Hayes responded he had learned from "very credible sources" that CMS would restore the funds.

Height shot the news to Wall Street, prompting the stock spike. After the Journal reported the chain of events, investigators from the SEC, CMS and Mr. Grassley's office began looking into the matter.

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